Gm Chief: Bankruptcy 'Probable'

Automaker Expects To Need Another $5 Billion Soon

April 18, 2009|By Kendra Marr | Kendra Marr,The Washington Post

WASHINGTON -General Motors chief executive Fritz Henderson said Friday that the automaker still intends to restructure its business outside of bankruptcy, but a filing is "probable" given all the concessions it must achieve with such a short deadline.

GM, which has already received $13.4 billion in government loans, is working on a two-track plan: outside bankruptcy and inside.

"Contingency planning is under way," Henderson told reporters.

In a push to be more transparent, Friday's GM conference call was the first of a series of discussions designed to provide updates on the auto giant's restructuring decisions and actions, which must be completed by June 1.

In keeping with its Feb. 17 submission to the Treasury Department, GM will soon need another cash infusion in the second quarter to keep the company running.

"We expect to need about $5 billion in government funding soon," Henderson said. "It is premature to say there's been an approval for further funding."

GM has not yet made a request for the funds, Henderson said. Last month, GM announced it would forgo $2 billion in federal loans that it thought it needed to stay alive because it was making progress reducing costs.

Henderson reiterated the company's plan to "go deeper and go faster." It is working on getting a sustainable cash flow, as well as a "clean, healthy" balance sheet. GM has been talking to the ad hoc committee of bondholders, which is leading negotiations to cut debt, and the United Auto Workers.

But, since Chrysler must make the same deep cuts by the end of this month, the union has been focusing its efforts on GM's rival.

Henderson emphasized GM's goal of maintaining "four core brands" - GMC, Buick, Cadillac and Chevrolet - squashing rumors that the automaker is looking to discard GMC and Buick, which have raked in big profits for the company.

The company has also decided not to sell ACDelco, a parts division, despite having potential buyers.

"It's a highly profitable business for us; it's creating good, strong cash flow," Henderson said. "Our conclusion was that we weren't going to get the value for the business."

GM has three final bidders for Hummer and a potential purchase could be made next week, he said.

A group led by private equity firm Black Oak Partners has approached GM about buying Saturn.

As for Saab, "our books are open, if you will," he said.

GM had also intended to whittle down its extensive dealer network to 4,100 dealerships by 2013 or 2014. Treasury said that was not sufficient, so the company is working on accelerating that process.

Henderson reassured reporters that the government is not trying to get into the automotive business.

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